The net present value of all the US federal obligations is about $70 trillion, $49 trillion of that is Medicare. In my opinion, we will never be able to pay that money back - so does our current deficit matter at all?

If we implement austerity, the government will collect less in tax revenue - so for each dollar cut, there is less that $1 in defect reduction - maybe quite a bit less. If our end game is a debt default of some kind, it does not seem to matter how much we borrow before we default. And cutting back on government spending could put us into a depression.

I think that Bernanke has already started to default on the debt - by having the federal reserve print money and buy US Treasuries. I think that the end game will be to continue to buy treasuries as long as there is no inflation, and in the end the Fed will gift the treasuries it holds to the SS and Medicare trust funds - which would wipe out off-balance sheet debt without officially admitting to a default.

Additionally, if the choice is made to default (effectively) my monetizing the debt (printing money) this will have the effect of basically taxing (and stealing wealth from) people who save and people on fixed or relatively fixed incomes.

While I agree that the numbers are not very encouraging, and default is probably inevitable, taking the position that it doesn't matter how much we borrow in the face of this situation would be downright immoral. It would be the same thing as stealing.

Think of it at an individual level: Imagine you knew there was no possible way to repay your debts, and you had no intention to do so...but you keep borrowing money to buy goods and services that you need or want. In effect you are stealing from your lenders.

I don't think it is quite that simple. China is our primary lender - and they have a US dollar surplus because they keep their currency artificially low.

They end up selling yuan and buying dollars to suppress the yuan, then investing the surplus dollars in treasuries. It is a predatory practice on their part, designed to keep them at full employment and to discourage imports of goods - we are stealing from each other in other words.

The current situation is unsustainable - and I don't think that the defect would go down much no matter how much we tried to cut budgets due to the resulting lower tax revenue.

I think more damage will be done attempting to do the impossible than just carrying on as normal.

Basically, we know its inevitable that Western society is going to collapse some short time in the future and there is Nothing we can do about it. We might as well keep partying up to the point we all get slaughtered, than be miserable for the remaining few years up to the slaughter.

Its tough MJ1970, just tough. Remember - everything you own/have/saved has been created by this merry-go-round, in most part by stealing/exploiting from people and nations less fortunate than you.

Its just a consequence of dog eat dog Capatalism that the shit catches up with you eventually. Take your blessings that you've managed to go 41 years - maybe you'll get 50 years - of a good life. Most people on earth are born into the shit we created for them by our collective exploitation, so we could have easy lives. Tough shit - even trumptman knows his time is up...

I don't think it is quite that simple. China is our primary lender - and they have a US dollar surplus because they keep their currency artificially low.

They end up selling yuan and buying dollars to suppress the yuan, then investing the surplus dollars in treasuries.

Which we keep printing due to our persistent budget deficits.

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Originally Posted by e1618978

It is a predatory practice on their part...

Lending us money because we cannot execute any fiscal restraint is a predatory practice?

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Originally Posted by e1618978

The current situation is unsustainable - and I don't think that the defect would go down much no matter how much we tried to cut budgets due to the resulting lower tax revenue.

The situation is unsustainable. That much is true. The reality is that the socialist/fascist state has gotten us to this point. When you look at the budget it is primarily a welfare/warfare budget. This is what happens when you go down that road.

Its tough MJ1970, just tough. Remember - everything you own/have/saved has been created by this merry-go-round, in most part by stealing/exploiting from people and nations less fortunate than you.

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Originally Posted by marcUK

Its just a consequence of dog eat dog Capatalism that the shit catches up with you eventually.

I don't know what your definition of capitalism is, but I will say that if you're implying this has anything to do with a free market economy, you're mistaken. The central part of this is government spending coupled with a government granted monopoly/cartel over the monetary, credit and banking system that has created the mess we're in right now. This is so obvious it cannot possibly be denied except through willful ignorance or propaganda.

I don't know what your definition of capitalism is, but I will say that if you're implying this has anything to do with a free market economy, you're mistaken. The central part of this is government spending coupled with a government granted monopoly/cartel over the monetary, credit and banking system that has created the mess we're in right now. This is so obvious it cannot possibly be denied except through willful ignorance or propaganda.

You dont need to read too deep. Just make the most of the time you have left.

Its always been inevitable since inception, that tthe system was always going to rape anyone it could. We've done our raping, and it has given us a couple of hundred years af prosperity, but now we are the ones who are about to be raped.

We wanted to play the game while it worked for us, but it had to end someday. Bend over MJ, this IS going to hurt....

The net present value of all the US federal obligations is about $70 trillion, $49 trillion of that is Medicare. In my opinion, we will never be able to pay that money back - so does our current deficit matter at all?

Yes of course it matters. Most of that obligation is in the future and owed to one generation, the Baby Boomers which is why society will hand them a figurative silver bullet and go back to business as usual.

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If we implement austerity, the government will collect less in tax revenue - so for each dollar cut, there is less that $1 in defect reduction - maybe quite a bit less. If our end game is a debt default of some kind, it does not seem to matter how much we borrow before we default. And cutting back on government spending could put us into a depression.

This might be your belief if you're a Keynesian, but other economic schools of thought don't see this outcome. They rightly see that many current government services have no unifying and multiplying effect. Many are costly, lengthy and cause many more problems than they fix. Most current government actions amount to a giant boat anchor and removing that anchor will allow more growth.

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I think that Bernanke has already started to default on the debt - by having the federal reserve print money and buy US Treasuries. I think that the end game will be to continue to buy treasuries as long as there is no inflation, and in the end the Fed will gift the treasuries it holds to the SS and Medicare trust funds - which would wipe out off-balance sheet debt without officially admitting to a default.

Any thoughts?

I've an entire thread filled with them. The grand boomer delusion is the belief that the dollar cannot be broken and that the U.S. economy sits astride the world as it did just after WWII. You can continually see how facts to the contrary of this just flummox and confuse them, thus my designation of it as a blind spot. However the U.S need not follow that delusion and I believe increasingly that is what these elections and the changes being wrought because of them are about. We've seen the Democratic party which loved to tag Republicans as the "Party of No" become the "Party of Go" as in literally fleeing the facts of the matter by running to nearby states to avoid votes.

My position has been that the Fed will attempt to run the money supply hot while decoupling benefits from inflation. This along with some deficit reduction plans that reduce the demanded benefits can bring things back into line. Much like how it actually requires a hell of a lot of calories to remain obese, it requires a hell of a lot of time and money to be this twisted and backwards, and as in the former example, health can be restored when proper action is taken.

The money they are lending us they got by selling us goods they've made.
It would unwind things alright. But probably not in the way you think.

And those goods are artificially cheap because of the exchange rate. I don't think you understand my point.

China buys dollars, sells yuan -> money printing there pushes the exchange rate down and makes their goods easy to export, while at the same time giving them a big US dollar reserve.

That US dollar reserve, which is a side effect of their predatory currency policy, gets loaned back to us. I don't feel bad at all if we print that debt into extinction, the Chinese printed it into existence in the first place.

Yes, the Chinese government (and people) has been subsidizing American's purchase of Chinese goods.

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Originally Posted by e1618978

I don't think you understand my point.

Possibly.

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Originally Posted by e1618978

China buys dollars, sells yuan -> money printing there pushes the exchange rate down and makes their goods easy to export, while at the same time giving them a big US dollar reserve.

I understand, the Chinese government (and people) has been subsidizing American's purchase of Chinese goods.

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Originally Posted by e1618978

That US dollar reserve, which is a side effect of their predatory currency policy, gets loaned back to us.

Yes it does. Correct. Specifically it gets loaned to the US government when the government prints up Treasury bills (promises to pay back the cash + interest) as a result of spending more money then it receives in taxes.

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Originally Posted by e1618978

I don't feel bad at all if we print that debt into extinction, the Chinese printed it into existence in the first place.

Not quite. You seem to be ignoring the deficit spending that starts the borrowing/lending transaction. And you should feel very badly "if we print that debt into extinction" because the end result of that will be quite bad.

I understand, the Chinese government (and people) has been subsidizing American's purchase of Chinese goods.

And the American government, by letting the Chinese subside those goods, is also letting China export unemployment to the US.

The whole concept of "stealing" does not have much meaning when you are talking about two countries that print their own fiat currency. At the country level, it is only play money with no intrinsic value.

The US printed the money and gave it to China, they never promised to keep the value of the currency stable - in fact they have a stated policy of inflation.

And the American government, by letting the Chinese subside those goods, is also letting China export unemployment to the US.

Hmmm...there's so much to unpack in this little statement. The American government letting...exporting unemployment....

*sigh*

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Originally Posted by e1618978

The whole concept of "stealing" does not have much meaning when you are talking about two countries that print their own fiat currency. At the country level, it is only play money with no intrinsic value.

Sort of. Mostly you're right, but this play money (and it is indeed that) is deeply ingrained and used to transfer real wealth, typically from the average US (or Chinese) citizen to politically connected constituencies (like banks) and the government.

Quote:

Originally Posted by e1618978

The US printed the money and gave it to China, they never promised to keep the value of the currency stable - in fact they have a stated policy of inflation.

True. Let's just see what happens if the US decides to default (by monetizing) on their debts. Let's just see how well that works out. I'm betting quite badly.

True. Let's just see what happens if the US decides to default (by monetizing) on their debts. Let's just see how well that works out. I'm betting quite badly.

They have been monetizing the debt for a couple years now, it already started. Any federal debt bought by the federal reserve effectively goes away - since the treasury pays interest on the debt to the fed, and the fed pays its profits back to the treasury as dividends.

Why is a dollar printed by the fed and different to a dollar lent by the chinese?

It's a difference in time basically. The dollar that the Chinese have is a dollar already printed. It has already devalued the dollars that existed before it was printed. A dollar printed today (or tomorrow) does the same thing just a day later.

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Originally Posted by marcUK

If it was the goal of the fed to imperceptibly erode peoples wealth, why wouldnt they just print the money slowly?

That's what they've been doing for basically the last 100 years.

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Originally Posted by marcUK

You seem to be awfully uptight about money.

Not really. Understanding != uptightness. I understand what's going on and the dire effects it is likely to have to lots of people, sadly. But that's what happens when governments try to create money...they end up destroying people's lives.

They have been monetizing the debt for a couple years now, it already started.

I know. And the Chinese know too and have been steadily converting their dollar holdings into real wealth like land, factories, gold, etc. It's a slow draw down because they have a vested interest in not devaluing the dollar too rapidly....this would be the equivalent of having a dollar bonfire and having given the US all of those goods for nothing. It would be generous of them to have done so, but that's not their end game or goal. They are on the path to try an establish the Yuan as the world "reserve currency" and replace the US$.

They are on the path to try an establish the Yuan as the world "reserve currency" and replace the US$.

I don't think that is true - the whole Chinese growth "miracle" is based on currency manipulation, and that is only easy for them to do because the yuan is a local currency. It is illegal to take yuan out of the country - they have capital controls.

If they opened up the currency to make it a global reserve currency, they would have to let it float, which would kill their whole deal.

I don't think that is true - the whole Chinese growth "miracle" is based on currency manipulation, and that is only easy for them to do because the yuan is a local currency. It is illegal to take yuan out of the country - they have capital controls.

But that's changing.

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Originally Posted by e1618978

If they opened up the currency to make it a global reserve currency, they would have to let it float, which would kill their whole deal.

It's a difference in time basically. The dollar that the Chinese have is a dollar already printed. It has already devalued the dollars that existed before it was printed. A dollar printed today (or tomorrow) does the same thing just a day later.

I dont think its quite as simple as that. But anyway, thats just a consequence of the capitalist system based on fiat currency. Everyones happy to play the game - its like a big pass-the-parcel we played as kids, there are lots of prizes, but star prize - the last one - turned out to be a pile of shit. Oh well, too bad - it was known from the start that the merry go round wouldnt revolve forever.

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That's what they've been doing for basically the last 100 years.

defeated your own argument then. thanks for being honest.

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Not really. Understanding != uptightness. I understand what's going on and the dire effects it is likely to have to lots of people, sadly. But that's what happens when governments try to create money...they end up destroying people's lives.

So basically although it has transpired that through sleight-of-hand and threat of force that the western world has had it good, by exploiting everything and everyone for a hundred or so years - Now that the party is over and reality has come home to roost - It will mean that we might have to start living like the other 95% of the people in the world....well you should be grateful that you had it good for so long. It isnt a right, it was a priviledge.

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I do. Do you?

Ive never been better. I remember that when the financial crisis kicked off I said right here that it was time to get your head straight, and that alot of people would be going mad shortly....Ive seen alot of mad, stressed, crazy people the last few years - I took my own advice, best dividends ever...

I believe my comment was about the rate and speed of this money printing...the rate of inflation. But whatever.

but you say that we borrowed chinese dollars instead of printing our own to prevent inflation, then say we had been printing our own dollars anyway because it was the goal of the fed to imperceptibly steal our wealth....

but you say that we borrowed chinese dollars instead of printing our own to prevent inflation,.

No I didn't:

Quote:

Originally Posted by MJ1970

Undoubtedly to avoid having to print that money and creating hyper-inflation. The Fed would rather slowly and almost imperceptibly erode people's wealth than to have it all dissolve and huge flash.

In this statement was an implication of the rate of monetization. The Fed (almost always) inflates. It's what it does. It's openly stated a fear of deflation (which is a funny thing to say because it is in control of both.) The Fed inflates. It has been inflating it has just been doings so slowly, almost imperceptibly over a hundred years. The debt has now gotten so high and the fear of the Chinese holding that debt now has some folks suggesting we just just monetize all of that debt (print it away). This would very likely result in some level of hyper inflation.

Quote:

Originally Posted by marcUK

then say we had been printing our own dollars anyway because it was the goal of the fed to imperceptibly steal our wealth....

Yes, they have been doing this slowly over about 100 years. To monetize away the debt that exists right now would require creating more money faster than they've been doing.

Q. Why have the chinese been lending us money, when we know we can print our own from thin air very easily?

A. Undoubtedly to avoid having to print that money and creating hyper-inflation. The Fed would rather slowly and almost imperceptibly erode people's wealth than to have it all dissolve and huge flash.

At this point I'm not really sure if you are deliberately misunderstanding me or not. I feel that I further clarified that statement for anyone who couldn't understand what I meant in the post above. But feel free to go on. You win...or something.

At this point I'm not really sure if you are deliberately misunderstanding me or not. I feel that I further clarified that statement for anyone who couldn't understand what I meant in the post above. But feel free to go on. You win...or something.

I have reread, I dont feel you have clarified it enough.

Why are we borrowing chinese dollars to prevent inflation, if it is the feds goal to imperceptibly steal our wealth by printing more of our own money via inflation?